Air India's Rs 30,000 crore revamp stuck in red tape

A financial and operational reengineering is being pushed by the civil aviation ministry as Air India is saddled with accumulated losses of Rs 20,000 crore and debt of Rs 43,000 crore, which is being restructured.

NEW DELHI: Nearly six months after the Cabinet approved Air India's Rs 30,000-crore financial restructuring plan, the package has hit an air pocket with the finance ministry holding back sovereign guarantee amid indications that it would seek fresh commitments from the national carrier.

The delay has already meant that National Aviation Company, which flies under the Air India brand, has had to extend its non-convertible debenture (NCD) issue and may be forced to rework some of the calculations which were done at the start of the year.

Aviation sources fear that the restructuring may get expensive as the loss-making public sector company is dealing with higher debt servicing costs. A sovereign guarantee helps in reducing the interest cost as the risk of default is taken over by the government. Despite several attempts, Air India chairman and managing director Rohit Nandan could not be contacted on the phone over the weekend.

A financial and operational reengineering is being pushed by the civil aviation ministry as Air India is saddled with accumulated losses of Rs 20,000 crore and debt of Rs 43,000 crore, which is being restructured.

As part of the package, after receiving the guarantee, Air India was to issue NCDs or bonds of Rs 7,400 crore to banks, LIC and EPFO to retire existing high-cost loans. This is in addition to bank loans of Rs 11,000 crore which have already been restructured. But for the past few weeks, the finance ministry has not moved on the proposal.

Even the decision to rework the aircraft loans of Rs 19,000 crore is stuck due to indecision in North Block.

It's been over a year since the financial restructuring programme started, initially with bank loan restructuring. In April, the cabinet committee on economic affairs (CCEA) was forced to step in after the finance ministry raised the red flag over the loan restructuring by banks saying the lenders would be crippled by a Rs 10,000-crore hit. Subsequently, after meetings between civil aviation minister Ajit Singh and Pranab Mukherjee, then finance minister, the plan was reworked and guarantees and upfront equity infusion were included.

Following the CCEA meeting milestones such as occupancy, on-time performance, fleet utilization and rationalization of employees' pay structure were put in place after deputy chairman Planning Commission Montek Singh Ahluwalia and P Chidambaram, who was then home minister, flagged the issue. The revamp will cover the airline's debt till 2021.

A financial and operational reengineering is being pushed by the civil aviation ministry as Air India is saddled with accumulated losses of Rs 20,000 crore and debt of Rs 43,000 crore, which is being restructured.

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Aviation sources fear that the restructuring may get expensive as the loss-making public sector company is dealing with higher debt servicing costs.